Investing in Agribusiness Stocks and Farmland: A Boom or Bust Analysis

• Main Author: Rasool, Asif
• Format: Others
• Published: DigitalCommons@USU 2018
• Subjects: Investing; Agribusiness; Copula; VAR; Farmland; Economics
• Online Access: https://digitalcommons.usu.edu/etd/7162; https://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=8282&context=etd

As intelligent investors, we should always consider holding assets of different classes. Investing in assets from various classes allows us to minimize portfolio risks. In this paper, we recommend a better way of devoting money, especially for the investors who are interested in the agricultural sector. Historically fund managers use Markowitz framework to create financial portfolios. However, that framework has some fundamental limitations. A copula is a modern approach that counters the disadvantages of the Markowitz framework, to deal with portfolio construction. Copula also identifies the downside risk (the maximum amount of money you can lose) of a portfolio. We found that farmland is the best asset to have in an agricultural portfolio. However, farmland is scarce. So, we introduce copula, which can be used to find alternative assets. We also found that the portfolio composition does not change during agricultural boom or bust. Currently, the US agricultural sector is going through a slump period. Funds invested in a portfolio during the good seasons (given it was correctly invested) should not be altered during the bad times.